CC WORKSESSION 11111985 - Laserfiche WebLink

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-2- would have to know whether the City would accept the change from condos to rental or • would be able to purchase the property to complete the final phases of the project with Tax Increment Bonds, which are also in jeopardy of losing their tax exempt status after the first of the year before proceeding with the Housing Revenue Bond issuance. Because of the latter, the Manager said, he had requested the City's Financial Con- sultant, the Springsted Company, to project the tax increment cash flows which would be needed to make a 300 unit rental project work now that the 150 unit Kenzington condominium and the Walker project, with 45 units of elderly subsidized rental , are underway, with the timetable for the new project set in such a manner as not to complete with the marketing of the Kenzington condominiums. The study to be presented by Richard Treptow of Springsted, projected the cash flows for 300 units of elderly market rate rental housing with an average rent of $800 to be constructed in two phases of about 150 units each, the first to be started in the spring of 1987 for occupancy the following spring and the second phase of construction to commence in August of 1988 and to be ready for occupancy the next summer. Councilmember Ranallo said he perceived the issue, which was very important, was whether the community was ready for the change in the project. Commissioner Jones arrived at 7:55 P.M. , just after Mr. Treptow had distributed copies of the Springsted projection of cash flows and tax increment tax revenues for all three phases of the Kenzie Terrace project. The consultant pointed out that the cash flow projections in Schedule A indicated an annual surplus of available capital • of around $300,000, which would be almost double the amount needed to retire the debt service and which, Mr. Treptow added, might conflict with the federal arbitrage schedule which regulates against building up surpluses. Because of this the financial adviser indicated he had also drawn up Schedule B which would accelerate the payoff of the bonds three years earlier, leaving an annual cushion of $150,000, or over 33%, more than the estimated debt service. In any event, Mr. Treptow said, he viewed this to be a _very strong bond issue in terms of the City's ability to pay it off as compared to many other tax increment projects against whom the financial consultant said he would rank the City' s project as either an 18 or 19 on a scale of 1 to 20 (.with 20 being the most financially strong) . When the Mayor questioned what effect delays like those experienced with the Kenzing- ton could have on the City's risk, Mr. Treptow indicated he perceived the timing of the $442,400 purchase of land from the shopping center owner to be very critical because, as he saw it, the time the City would be most at risk would be during the interim between the purchase and construction start up on the first 150 units. Because of this risk, this City would need sufficient guarantees from the developers that performance would occur as projected, he said. Mr. Treptow also said the levels of those guarantees and how they are exercised would have some legal implications which could affect the validity of the bond sales. Mr. Arkell 's response to these statements later in the discussion was that the $400,000 Letter of Credit carried by the developers should sufficiently cover that guarantee. The Financial Consultant answered a question from the Manager about the feasibility • of proceeding with the project with taxable bonds, by saying that would require more bonds with later payment dates which could cost the City about a half a million dollars more in interest.